The real estate market in Somerville has thrived in recent years. As housing costs have soared in many neighborhoods around Boston, Somerville’s single family median sales price has ascended from under $700K 3 years ago to almost $1M today. Between increasing enrollment at nearby Universities and the wealth of VC funding pouring into Boston and Cambridge, demand for property in Somerville is at an all-time high.
As a result, the median sale price for single family homes in Somerville is $993K over the past 365 days, more than $225K over Boston’s single family median sales price. The median condo sold for $823K during that same time span, which is the 4th highest median condo price out of all Boston suburbs.
Somerville’s seemingly endless rental demand and rising rent prices make it an attractive market for real estate investors. However, with prices so high for Somerville real estate, a newer investor may look elsewhere for a better cap rate. We can get a rough estimate of what the projected net operating income (NOI) would be for a Somerville investment property based on these median sales prices.
Somerville Investment Properties & Projected Net Operating Income
To get a projection of NOI in Somerville, we’re estimating what yearly expenses would look like for a Somerville property at the current 1 year median sales price. We’re comparing that to the yearly revenue generated from the current average rent price for Somerville apartments. We also factor in yearly expenses for property taxes based on current rates, average homeowner’s insurance in Somerville, and 10% maintenance on homes or $300 estimated HOA for condo NOI calculations.
Somerville Projected NOI By Property Type
If we apply this formula to each property type, you can see that both single family homes (-$17,200) and Somerville condos ($-13,057%) yield a negative NOI at current median sales prices and average rent prices.
|Somerville||Avg. Rent x 12||Estimated Annual Expenses||NOI|
So if we’re going to find opportunity in Somerville, it won’t be by focusing our search on specific property types. We’ll have to dig a little deeper into MLS data to find some potential.
Somerville Projected NOI By Property Size
If we take the median sales prices for specific property sizes in Somerville, we finally find some options that could yield a profitable investment. Thanks to below average median sales prices for smaller properties, NOI is $15,962 for studios and close to breaking even for 1 bedroom properties ($-1,826).
Just because the average NOI is negative for specific property type or size does not mean every property will be a loss for a neighborhood. In fact, if a category is close to breaking even, you can assume that there is a sizable percentage of active listings within that category that would be profitable. Every MLS listing is unique and by applying the same math, you’ll be able to easily find the properties that will have the most upside in any market. All Boston real estate data provided by Boston Pads.